A Guide to Planning and Budgeting for a New Startup
As the founder of a startup, you’re well aware that you sometimes have to spend money in order to make money — and to generate some serious buzz.
But with your limited funds, it can be tough to figure out where the money that you do have will be able to do the most good for your startup.
In short, planning and budgeting can be tricky in the startup world, and the stakes are incredibly high.
In this post, you’ll learn the ins and outs of business planning and budgeting.
Read on to learn how to get out — and stay out — of the red, and how to make every dollar count.
1. Create a Profitability Timeline and Expense List
The first step in business planing and budgeting for your startup?
You need to make a financial business plan that will help you to keep track of all of your expenses. Remember that your expenses not just the costs of labor, manufacturing a product, getting a patent, and buying/renting equipment.
They’ll also include marketing costs, taxes, IT services, hiring a legal representative, creating content for your website, and your office space as a whole.
Check out this post to get a better feel for planning and budgeting your funds when it comes to the earliest phases of your business.
Additionally — and especially if you’ve worked with investors — you’ll need to create a rough timeline for profitability. This kind of estimation will also make you much more eligible to be approved for business loans and other kinds of funding.
Plus, having a reminder that your still months away from making a profit will prevent you from overspending on unnecessary items.
To create an accurate profitability timeline, we suggest considering things like inflation, future hirings, rent increases, new products or branches, or the costs of your products.
2. Never Mix Business and Personal Finances
If you want to learn how to manage a budget in business, it’s essential that you avoid any sort of co-mingling of your personal and business finances.
First of all, it goes without saying that using business funds to finance your personal purchases could get you into serious legal trouble.
But more importantly?
Even if you just make a few office supply purchases or take a potential investor out to lunch on your credit card, it will be tough to keep track of your business expenses.
This means that you won’t really be able to accurately estimate your business expenses. The last thing you want is for your personal spending to be the very thing that puts your startup in jeopardy.
3. Start With Freelancers
One of the most common planning and budgeting mistakes that far too many startups make?
Hiring full-time — or even part-time — employees when they really can’t yet afford to.
Having someone on-call for your company 24/7 certainly has its benefits. However, ask yourself if those benefits truly outweigh the costs of salaries, health insurance, taxes, and other employee expenses.
Since the average cost-per-hire is around $4,000, the answer for a young company is usually “no.”
Instead, it’s a much smarter move to hire contractors and freelancers. First of all, this will help you to better understand the kinds of employees that you’re looking for, and the skill sets that your startup needs.
4. Cut Costs Where You Can
Relying on freelancers isn’t the only way to lower the overall operating costs of your startups.
You need to identify potential ways to save in every aspect of your business, from the people you hire to the space you work within.
If your company is just getting started, you may not yet need an office space. Instead, consider working from home or renting out a co-working space. You could also rent office space only when you need to meet with a client or gather all of your team members in one space.
When you’re buying computers, furniture, and other electronics for your startup?
Look for used options before you buy new.
Another tip to help you to identify deals, understand what you should be spending your money on, and make the right connections?
We suggest that you become a member of a local business association.
You’ll find the right freelancers, hear about upcoming discounts, and of course, get access to the latest local business buzz before anyone else does.
5. Rely on Budgeting Software
Especially if you’re interested in categorizing your spending so that you can seek to eliminate unnecessary spending and identify high-cost areas?
We suggest working with budgeting software.
Additionally, business planning and budgeting software will help you to remember the smaller costs that can add up. This can include things like office supplies, food and entertainment for events, and even travel costs.
The right software will also be able to help you to keep better track of your debt — so that you might even be able to pay it off sooner.
Need Planning and Budgeting Business Coaching?
Now that you know more about how to manage a budget in business, you’ve likely already identified a few ways in which you can lower your startup’s overall expenses and operating costs.
And while software to help you budget is a great first step?
Sometimes, you need the one-on-one coaching of an experienced professional to help you to truly understand where you should allocate your funds.
That’s where I want to be able to help you with planning and budgeting for your startup.
Together, let’s make your startup a success.
